Answer
c. $80
Work Step by Step
GDP includes the money value of all the final goods and services produced in the economy. Here, the wool sold by Mr Angus to Mr Barnaby is not the final good but an intermediate good used in the process making the sweaters, which is the final good.
Mr Barnaby produces two sweaters whose market price is \$40 each. However, the sweater which he sold off is accounted for in the consumption spending part in the GDP. The sweater which remains on the shelf of Mr Barnaby is deemed to be purchased by himself and thus remains under the head of investment spending in GDP.
Hence, both the sweaters are accounted for in GDP figures which results in the GDP being \$80.
